valuing the intangible: where to start?: the full family of intellectual property and other...
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Valuing the Intangible: Where to Start?The Full Family of Intellectual Property and
Other Intangibles
Sponsored by Sheppard MullinDecember 22, 2009
Presented by:CONSOR® Intellectual Asset Management
www.consor.com
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Topics
Why are intangibles important in today’s economy?
Why are they relevant to your practice?
Defining terms: Intangible Assets and Intellectual Property
Intangibles as common thread in and out of litigation
Fundamental problem: what are they worth?
How are intangibles valued in practice?
How can intangible-related damages be quantified?
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Why Should I Care?
Commercial and litigation business clients rely on protecting and growing their brands, leveraging them through licensing; or guarding their technical advances and unique product features from competitors.
Beyond specialized IP law practices, business, commercial, tax and estate practitioners increasingly have to be involved in identifying, protecting, applying, and defending intangibles owned by businesses and individuals.
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Intangible Assets and Intellectual Property
Intellectual Property are the various types of rights given specific legal protection.
Traditionally including: Copyrights Patents Trademarks
And increasingly extended to: Trade secrets Rights of publicity
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Business IA and IP
Intellectual Property
PATENTS
COPYRIGHTS
TRADEMARKS
TRADESECRETS
Intangible Assets
Data &Knowledge
Bases
COPYRIGHTS
Customer& VendorRelations
ProprietarySoftware
InternetAssets
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IP Valuation Tools and Methodologies
Traditional Methodologies Market Approach Cost Approach Income Approach
Proprietary Methodologies VALMATRIX®
VALCALC® BVEQ™
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Case Studies Case #1 – Woody Allen:
Valuing Celebrity Rights and Rights of Publicity Case #2 – adidas:
The Largest Trade Dress Award in History Case #3 – Tower Records:
Extracting Value in Bankruptcy Case #4 – The Marlon Brando Estate:
Estate Planning and Tax Issues Case #5 – Sara Lee vs. Jimmy Dean:
Valuing Intangibles in Contract Disputes Case #6 – IP in Corporate Financing Deals
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Case Study #1: Woody Allen
Client:
Context:
Components:
Cause:
Approach:
Concept of Value:
Total Damages:
Woody Allen
Litigation – unauthorized use of name
Comparable product endorsement fees
Publicity rights infringement
Consumer impressions
Market Approach
$5.0 Million
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Case Study #1: Woody Allen (cont’d)
The establishment of value for these intellectual property rights, both for a deal structure and in litigation
Customs and practices regarding rights ownership, usage, and fee structures
Econometric modeling of litigation outcome
Precise prediction of settlement amount
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Case Study #2: adidas
Client:
Context:
Components:
Approach:
Concept of Value:
Awarded Damages:
adidas
Trademark / trade dress infringement
Valuation of trademark
Establishment of trade dress component Establishment of total damages
Valuation of damages to trade dress
Components of value
Market Approach, Relief from Royalty
$304.6 Million
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Case Study #2: adidas (cont’d)
Largest trademark and trade dress award in history
Defendant: Payless Shoes
Calculated actual damages of $31.3 million
Product sourcing fees of $10 million disallowed since Payless could have procured sourcing independent of adidas
Data related to actual sales and licensing activities were critical
Judge reduced damages to 2x our damage calculations
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Case Study #3: Tower Records
Client:
Context:
Components:
Approach:
Concept of Value:
Total Damages:
Tower Records
Bankruptcy
Trademarks
Domain names
Website / Internet platforms
Databases
Franchise agreements
Sequestered auction
Liquidation
$4.5 Million
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Case Study #3: Tower Records (cont’d)
Extracting value in bankruptcy
Sale 9 months after store closures
Targeted global IP asset sale marketing campaign
Estimated asset value $1.0 – 2.0 million
8 international bidders, 36 hour auction process
+ / - $4.5 million
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Case Study #4: The Estate of Marlon Brando
Client:
Context:
Components:
Cause:
Approach:
Concept of Value:
Total Value:
The Estate of Marlon Brando
Estate planning and tax issues
Post-mortem rights of publicity
Estate value
IRS audit
Analysis of historical income
Income approach
$1.4 million
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Case Study #4: The Estate of Marlon Brando (cont’d)
Estate planning and tax issues
Value of post-mortem rights of publicity
Valuation to meet IRC § 2031
Historical endorsement deals to predict future revenue
Present value of 10 year future stream of revenue set at $1.35 million
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Case Study #5: Sara Lee vs. Jimmy Dean
Client:
Context:
Components:
Cause:
Approach:
Concept of Value:
Sara Lee
Contract dispute
Valuation of stock distribution
Valuation of dividend income
Valuation of payments
Valuation of retirement benefits
Trademark infringement
Discounted cash flows
Income Approach
Enterprise Valuation
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Case Study #5: Sara Lee vs. Jimmy Dean (cont.)
Category Estimated Value
Stock distribution $ 200,000,000
Dividend income 85,000,000
Payments 30,000,000
Retirement benefits 10,000,000
TOTAL VALUE $ 325,000,000
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Case Study #6: IP Securitization
Client:
Context:
Components:
Cause:
Approach:
Concept of Value:
Global Real Estate Services Franchisor
Several hundred million dollar IP-backed securitization
Trademarks and brand assets
Franchise services
Corporate restructuring
Revenue projections
Royalty cash flow allocation
Market approach
Income approach
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Case Study: IP Securitization
Goal: Secure financing for corporate expansion backed by the company’s cash flows and IP
Task: Identify and value the bundles of intangibles to be transferred and/or licensed to the special purpose entities (SPE) that will hold the IP and provide the franchise support services: Performed a Brand Apportionment Analysis to allocate value between the IP
and the Franchise Support Services being provided Determined the fair market value of the fully paid-up IP license to be granted
back to the operating company Determined the total value of the IP in the US to enhance investor confidence
Interfaced with the investment bank to support the stress testing scenario analysis– an essential element to assess the risk profile for the rating agencies and surety providers
2020
Discussion of Current Cases&
Questions